It is quite natural for investors to find out how big players are investing and examine their portfolio. Therefore, the media gives prominence to what billionaire investors like Warren Buffet says and details of their portfolios. In the Indian context three prominent celebrity investors who are most quoted and analysed are Porinju Veliyath, Dolly Khanna and Rakesh Jhunjhunwala.
From an investor point of view, there is nothing wrong in finding out what others are doing. There is also no harm in finding out how domestic and foreign institutional investors are betting on and their portfolio allocation across sectors. However, what is important while investing in equities or commodities or any asset class is your intention or goal. Two important things have to be made clear to yourself before you invest- what are my goals in investing and secondly what is my risk appetite.
When portfolio managers like Porinju Veliyath, Dolly Khanna or Rakesh Jhunjhunwala invest, they do so mostly on behalf of someone else with varying risk appetite. But they are backed by solid research and years of experience dealing in the market.
If you are new investor or doesn’t have substantial amount of money to invest in equities, it is better to set a goal and go for fundamentally strong stocks that will yield returns over the medium to long term either in terms of dividend payouts or capital appreciation.
As V Rajendran, Managing Director of Captsocks & Securities Pvt Ltd warns, “don’t trade but invest in securities as algo trading by large institutional players makes it difficult for small players to time their trades on an intra-day basis.”
When we see a news headline telling Dolly Khanna is selling some stocks or Porinju is buying more of some stocks, we are not sure at what levels they might have bought or sold or what caused them to take a buy or sell call.
As veterans in the broking industry will vouch, you will never make a loss on companies with a good track record of profits, revenue growth and return on equity. A company’s annual reports, quarterly earnings reports and recent news developments are good sources to make a basic assessment of its future growth potential. If you have the time and patience you also need to look at the cash flows, leveraging done, order books and related info for further clues. Understanding movement of the scrip on a weekly, monthly basis analyzing technical charts can also be useful in timing your investment. Relative Strength Index (RSI), MACD and ADX, stochastic indicators and shape of the charts give important pointers about how the scrip is faring.
In other words, when investing your money, be your own Porinju or Dolly Khanna and invest your savings not emotionally attached to it but making decision based on rational analysis of the market. Value investing delivers despite the bull and bear runs from time to time. That is where you can learn a few tricks from Buffet and other millionaire investors.